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EX-99.1
PRESS RELEASE, DATED August 10, 2000
[GRAPHIC OMITTED] FOR IMMEDIATE RELEASE
For more information contact:
Investor Relations
(303) 414-5347
Investor [email protected]
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ICG Reports First Quarter 2000 Results
Surpasses 1 Million Lines in Service
ENGLEWOOD, COLORADO (August 10, 2000) - ICG Communications, Inc. (NASDAQ: ICGX)
today announced second quarter results that include the installation of 208,000
customer access lines, ending the quarter with in excess of 1.1 million. Second
quarter revenue totaled $175.8 million, an increase of $58.1 million, or 49
percent, over second quarter 1999, and EBITDA was $23.5 million, an increase of
$8.3 million, or 55 percent, over the comparable period in 1999.
"I believe we have set records for our peer group with our team's outstanding
effort to install 208,000 lines and deploy eight new switches during one
quarter. We are very pleased with the operational progress of our 2000
expansion plan," said ICG Chairman and Chief Executive Officer, J. Shelby Bryan.
"Concurrently, we launched iConverge and DSL and initiated service over our
extensive VoIP network for unified messaging, all of which have excellent future
growth potential. Further, we have reached agreement with an incumbent
telephone company that establishes reciprocal compensation rates for three
years, providing certainty of revenue in the majority of our markets."
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Invitation: Please join us later this morning for a conference call and
simultaneous Webcast at 9:00 a.m. mountain time, 11:00 a.m. eastern time.
Please log on to the ICG Web page at www.icgcom.com. The Webcast will remain
available for replay on the ICG Web site.
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Second Quarter Review
Network
During the quarter significant investment was made to expand the network
capacity and geographical footprint including deployment of eight new 5E
switches (located in Seattle, Chicago, Akron, Worthington, San Diego, West Los
Angeles, Sacramento and San Francisco). The Company added 285,000 ports of RAS
(remote access service) capacity, completed five new collocation sites with
incumbent telephone companies and made significant progress to expand and
upgrade the majority of data POPs and hub locations to support increased
traffic. Progress in capital projects demonstrates the Company's network
scalability, in line with its rapid growth in customer line installations.
Also, new contracts were completed for access lines with large and small
Internet service providers, including an existing customer that doubled its
existing 100,000 line contract to 200,000, providing ICG with a sales backlog of
more than 400,000 lines at quarter-end.
Products
Also during the quarter, the Company launched its iConverge service in
California, Colorado and Ohio. This is an integrated broadband service that
offers low cost T-1 and telephone service in combination with Internet service
through regional ISP partners. ICG intends to expand this program to other
commercial markets targeting small and medium-sized business customers. The
Company also initiated revenues from DSL (digital subscriber line) services
offered through third party providers and launched network infrastructure
services over its voice over IP network for a major unified messaging company.
The Company has capacity for nearly 10,000 voice over IP ports and plans to
rapidly expand its capacity to meet unified messaging and future voice over IP
demand.
Financial Review
Revenue
Second quarter revenue was $175.8 million, a 49 percent increase over the second
quarter 1999 as adjusted for discontinued operations. Local services revenue of
$127.5 million contributed 73
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percent of total revenue and includes revenue from regional business customers,
ISP customers and associated reciprocal compensation revenue for call
termination. Local reciprocal compensation revenue benefited by approximately
$4.0 million from higher rates than are expected in subsequent quarters as well
as a one-time benefit of approximately $9.0 million from the settlement of prior
disputed amounts. Special access revenue of $33.9 million compares to $39.8
million in the first quarter 2000, with each period recognizing the final
revenue earned from two 1999 long-term fiber optic lease agreements totaling
$2.2 million and $11.5 million, respectively. Long distance revenue was $4.4
million and switched termination revenue was $10.0 million.
Operating Costs and Gross Operating Margin
Second quarter operating costs were $102.6 million, resulting in a gross margin
on sales of 42 percent. Operating costs were $19.7 million higher than first
quarter 2000, due to a higher allocation of overhead costs, expanded operations
and aggressive market penetration in expansion cities, including approximately
$7.0 million associated with advanced deployment of customer lines in new
markets, which requires leasing certain facilities on an interim basis until
ICG-owned facilities are in service.
Selling, General and Administrative (SG&A) Expenses
Second quarter SG&A expenses of $49.7 million benefited from the impact of a
higher allocation of overhead to direct costs and a lower provision for
uncollectable accounts partially offset by increased professional fees compared
to the first quarter 2000. SG&A expenses were $6.7 million higher than the
same period in 1999 and $5.4 million lower than first quarter 2000.
Earnings
The second quarter loss to common shareholders was $296.6 million, or $6.09 per
share. The second quarter loss from continuing operations was $123.6 million,
or $2.54 per share, which compares to a loss from continuing operations of
$121.6 million, or $2.52 per share in the first quarter 2000 and $123.8 million,
or $2.63 per share, in the second quarter 1999. The loss from continuing
operations includes a $13.0 million benefit from a local reciprocal compensation
settlement. The total second quarter loss to common shareholders includes a
$173.7 million
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charge related to the preferred shares issued during the quarter, including a
one-time charge of $159.3 million, or $3.27 per share.
Reciprocal Compensation
During the second quarter, ICG entered into a Memorandum of Understanding with
an incumbent telephone company that establishes terms for reciprocal
compensation for local voice and Internet service provider traffic for three
years. This Memorandum establishes agreed rates and provides increased certainty
for future reciprocal compensation revenues. Upon implementation of agreed
terms, the Company will have 75 percent of its local reciprocal compensation
under long-term contract.
Capital Expenditures and Liquidity
Capital expenditures for the second quarter were $347.5 million, which included
$40.7 million for long-haul network capacity acquired under long-term lease.
The Company ended the quarter with $528.0 million in cash and short-term
investments.
Forward Looking Statement Disclosure
Information and statements presented in this press release may contain forward
looking disclosures, expressed or implied, that are based on the beliefs of
management as well as assumptions made based on information currently available
to management. These forward looking statements and information involve risks
and uncertainties including, but not limited to, the ability of the Company to
raise capital, future demand for the Company's services, general economic
conditions, government regulations, competition and customer strategies, capital
deployment, the impact of pricing and other risks and uncertainties. Should one
or more of these risks materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described in this press
release as anticipated, believed, estimated or expected. These risks are
detailed from time to time in various reports filed by ICG with the Securities
and Exchange Commission, including Form 10-K (filed for the year-ended December
31, 1999) and Forms 10-Q (filed quarterly subsequent to March 31, September 30
and June 30).
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Key Operating Statistics
<TABLE>
<CAPTION>
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As of Jun. 30, 2000 Mar. 31, 2000
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<S> <C> <C>
Access Lines/ports
Added in quarter 208,335 173,654
Total in service 1,112,964 904,629
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Total port capacity (customer port equivalent) 1,529,407 1,137,439
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Fiber route miles (operational) 4,767 4,807
Under construction 495 368
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Buildings connected
On network(1) 924 1,046
Hybrid 8,228 7,746
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Total buildings connected 9,152 8,792
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Switches
Circuit 43 35
ATM data switches(2) 24 24
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Total switches 67 59
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Long-haul capacity under long-term leases:
Miles 18,000 18,000
Capacity OC12 OC12
Collocations with ILECs 188 183
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</TABLE>
1. Beginning 2nd quarter 2000 on network buildings are redefined to exclude
facilities used exclusively for ICG network operations.
2. Frame relay switches no longer included in switch count as functionality now
handled by ATM switches.
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[ICG LOGO]
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Comparative periods
------------------------------------------------
Sequential Year-over-year
Three months --------------------- ----------------------
ended, Three months ended, Three months ended,
06/30/2000 03/31/2000 % Change 06/30/1999 % Change
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Local services $ 127,502 $ 102,595 24% $ 76,770 66%
Long distance 4,372 4,284 2% 5,093 (14%)
Special access 33,926 39,831 (15%) 23,438 45%
Switched terminating access 9,953 10,514 (5%) 12,353 (19%)
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Total revenue 175,753 157,224 12% 117,654 49%
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Operating costs (102,589) (82,902) 24% (59,458) 73%
Selling, general and administrative (49,676) (55,089) (10%) (42,975) 16%
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EBITDA (before nonrecurring and
noncash charges) 23,488 19,233 22% 15,221 54%
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Depreciation and amortization (72,892) (64,599) 13% (44,683) 63%
Provision for impairment of long-lived assets - - NA (29,300) NA
Other, net (1,373) (432) 218% (398) 245%
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Operating loss (50,777) (45,798) 11% (59,160) (14%)
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Interest expense (66,759) (62,634) 7% (51,308) 30%
Interest income 11,263 3,277 244% 3,793 197%
Other, net (155) 158 (198%) (1,843) (92%)
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Loss from continuing operations before income
taxes, preferred dividends and extraordinary gain (106,428) (104,997) 1% (108,518) (2%)
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Income tax expense - - NA - NA
Accretion and preferred dividends on preferred
securities of subsidiaries (17,135) (16,637) 3% (15,241) 12%
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Loss from continuing operations (123,563) (121,634) 2% (123,759) (0%)
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Discontinued operations:
(Loss) income from discontinued operations 736 - NA (692) NA
(Loss) gain on disposal of discontinued operations - - NA (7,959) NA
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736 - NA (8,651) NA
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Net ( loss) income $ (122,827) $ (121,634) (1%) $ (132,410) (7%)
=============================================================================================================================
8% Series A Convertible Preferred Stock:
Accretion and dividends to liquidation value (14,462) - NA - NA
Charge for beneficial conversion (159,279) - NA - NA
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Net ( loss) income to common shareholders $ (296,568) $ (121,634) (144%) $ (132,410) 124%
=============================================================================================================================
Net loss per share - basic and diluted:
Loss from continuing operations $ (2.54) $ (2.52) (0%) $ (2.63) (4%)
Income (loss) from discontinued operations 0.02 - NA (0.19) (108%)
8% Series A Convertible Preferred Stock per share (3.57) - -
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Net loss per share - basic and diluted $ (6.09) $ (2.52) (141%) $ (2.82) 115%
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Weighted average number of shares outstanding
- basic and diluted 48,723 48,189 46,988
=============================================================================================================================
</TABLE>
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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Year-over-year
Six months ended,
---------------------------------------------------------
06/30/2000 06/30/1999 % Change
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Local services $ 230,097 $ 144,169 60%
Long distance 8,656 10,224 (15%)
Special access 73,757 46,000 60%
Switched terminating access 20,467 21,592 (5%)
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Total revenue 332,977 221,985 50%
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Operating costs (185,491) (113,107) 64%
Selling, general and administrative (104,765) (85,783) 22%
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EBITDA (before nonrecurring and
noncash charges) 42,721 23,095 85%
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Depreciation and amortization (137,491) (81,058) 70%
Provision for impairment of long-lived assets - (29,300) NA
Other, net (1,804) 535 (437%)
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Operating loss (96,574) (86,728) 11%
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Interest expense (129,393) (98,746) 31%
Interest income 14,539 7,897 84%
Other, net 3 (2,343) (100%)
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Loss from continuing operations before income
taxes, preferred dividends and extraordinary gain (211,425) (179,920) 18%
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Income tax expense - - NA
Accretion and preferred dividends on preferred
securities of subsidiaries (33,772) (30,045) 12%
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Loss from continuing operations before extraordinary gain (245,197) (209,965) 17%
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Discontinued operations:
(Loss) income from discontinued operations 736 (803) NA
(Loss) gain on disposal of discontinued operations - (7,959) NA
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736 (8,762) NA
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Extraordinary gain on sales of operations
of NETCOM, net of income taxes - 193,029 NA
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Net ( loss) income $ (244,461) $ (25,698) 851%
=====================================================================================================================
8% Series A Convertible Preferred Stock:
Accretion and dividends to liquidation value (14,462) - NA
Charge for beneficial converision (159,279) - NA
=====================================================================================================================
Net ( loss) income to common shareholders $ (418,202) $ (25,698) NA
=====================================================================================================================
Net loss per share - basic and diluted:
Loss from continuing operations $ (5.06) $ (4.49) (13%)
Income (loss) from discontinued operations 0.02 (0.19) 108%
Extraordinary gain - 4.13 100%
Charges for 8% Series A Convertible Preferred Stock (3.59) - NA
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Net loss per share - basic and diluted $ (8.63) $ (0.55) NA
=====================================================================================================================
Weighted average number of shares outstanding
- basic and diluted 48,455 46,763
=====================================================================================================================
</TABLE>
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
($ in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
------------------ ------------------
2000 1999
===================================================================================================
<S> <C> <C>
Assets:
Cash and cash equivalents $ 496,688 $ 103,288
Short-term investments available for sale 31,283 22,219
Receivables, net 204,730 168,731
Property and equipment, net 1,963,976 1,525,680
Other assets, net 161,432 200,703
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Total assets $ 2,858,109 2,020,621
===================================================================================================
Liabilities and Stockholders' Deficit:
Accounts payable and accrued liabilities $ 228,894 $ 333,322
Capital leases 176,764 71,438
Debt 2,107,454 1,906,697
Other liabilities 157,967 33,705
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Total liabilities 2,671,079 2,345,162
---------------------------------------------------------------------------------------------------
Redeemable preferred securities of subsidiaries 548,632 519,323
Redeemable 8% Series A Convertible Preferred Stock 641,566 -
Stockholders' deficit:
Common stock 489 478
Additional paid-in capital 858,169 599,282
Accumulated deficit (1,861,826) (1,443,624)
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Total stockholders' deficit (1,003,168) (843,864)
---------------------------------------------------------------------------------------------------
===================================================================================================
Total liabilities and stockholders' deficit $ 2,858,109 $ 2,020,621
===================================================================================================
Diluted shares (in thousands) 58,509 50,217
</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
($ in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income (122,827) (132,410) (244,461) (25,698)
Net income (loss) from discontinued operations (736) 8,651 (736) 8,762
Extraordinary (gain) loss on sales of operations - - - (193,029)
Adjustments to reconcile net (loss) income to net cash
used by operating activities:
Accretion and preferred dividends on preferred securities
of subsidiaries 17,136 15,241 33,773 30,045
Noncash interest expense, net of capitalized interest 55,273 47,117 107,712 92,720
Depreciation and amortization 72,892 44,683 137,491 81,058
Loss (gain) transactions, net 392 22,574 (6,027) 17,397
Deferred compensation and contribution to 401(k) through
issuance of common stock 2,425 431 4,099 2,508
Changes in operating assets and liabilities, excluding the effects
of dispositions and noncash transactions 55,394 25,324 71,228 (24,354)
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Net cash used by operating activities 79,949 31,611 103,079 (10,591)
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Cash flows from investing activities:
Acquisition of property, equipment and other assets (206,016) (130,596) (347,315) (229,747)
Payments for construction of corporate headquarters (3,793) - (5,492) -
Change in accounts payable for purchase of long-term assets (13,120) (5,702) (43,484) (11,405)
Proceeds from sales of assets, net of investment purchases and
changes in restricted cash (697) 48,390 20,833 280,641
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Net cash (used) provided by investing activities (223,626) (87,908) (375,458) 39,489
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Cash flows from financing activities:
Proceeds from issuance of common stock 3,884 5,072 15,786 9,229
Proceeds from issuance of Series A Preferred Stock, net of issuance costs 720,330 - 720,330 -
Proceeds from issuance of long-term debt - - 95,000 -
Principal payments on long-term debt, capital leases, and payments of
preferred dividends (125,178) (9,462) (165,873) (14,075)
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Net cash (used) provided by financing activities 599,036 (4,390) 665,243 (4,846)
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Net increase (decrease) in cash and cash equivalents 455,359 (60,687) 392,864 24,052
Net cash used by discontinued operations 630 3,710 536 354
Cash and cash equivalents, beginning of period 40,699 291,690 103,288 210,307
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Cash and cash equivalents, end of period 496,688 234,713 496,688 234,713
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Supplemental disclosure of cash flows information of continuing operations:
Cash paid for interest 2,494 4,191 9,626 6,026
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Cash paid for income taxes - 522 220 931
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Supplemental schedule of noncash investing and financing activities of
continuing operations:
Acquisition of corporate headquarters assets through issuance of
long-term debt and conversion of security deposit - (642) - 33,077
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Assets acquired pursuant to IRU 40,653 - 98,147 -
Assets acquired under capital leases 96,999 2,430 111,414 6,190
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Total 137,652 2,430 209,561 6,190
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</TABLE>
